Business Organizations

Entrepreneur A person who organizes, manages and assumes the risks of a business in order to gain profits

Sole Proprietor Partnership FranchiseCorporation

Sole Proprietor Single owner of business with unlimited liability

Partnership A business organization owned by two or more persons who agree on a specific division of responsibilities and profits

Corporation An organization owned by many people but treated by law as though it were a person. The corporation can issue stock to raise capital. Stock holder’s liability is limited to the value of their stock.

obligation of debt and responsibility Liability One person has the entire obligation of debt and responsibility Unlimited liability owner’s responsibility for a company’s debts is limited to their investment Limited Liability

Advantages Easiest to set up Own boss Earns all the profits Low Taxes Obtain credit easy Disadvantages Assumes all liability Must make decisions for areas of business he is unfamiliar with Limited ability to raise capital and limited resources Lack of Permanence Sole Proprietor

What are the Qualities of a Successful Sole Proprietor?

Partnerships GeneralLimited Joint Venture

General: Equal share in responsibility and unlimited liability. Limited: One partner has unlimited Liability and manages day to day functions. The other partner is a silent investor who risks only his initial investment. Joint Venture: Partnership set up for a specific purpose for a short period of time.

Advantages Losses are Shared Potential for efficient management due to diversified talents Larger resource and capital well to draw from Lower taxes Disadvantages Profits are shared Partners each have unlimited liability Disagreements can slow decision process and lead to larger problems Exit of one partner leads to overhaul of business structure and/or potential shut-down Partnerships

Stock: Share of ownership entitling the buyer to a part of future profits and assets Common stock: Shares that entitle Stockholders to voting rights as well as future profits Preferred stock: Stockholders are entitled to profits before common stockholders but have no voting rights

$ $ $ $ $ $ $ Corporations pay their stockholders divide nds. Profits